Getting out of debt can be overwhelming, especially if you are living on an already tight budget but you can get out of debt! If you want to save enough money for retirement you must make getting out of debt a priority. Money you have to pay to a debtor is money you don’t have to save for the future.
If you don’t have a lot of money to spare, freeing up a little extra cash to put towards your retirement fund can be as simple as being creative. As an example, cutting costs via grants and benefits to relieve some of your monthly living expenses. Avoid piling on new debt through loans or credit cards and stick to your budget whilst creating an emergency savings fund for future surprises.
To pay off your debt faster here are a few tips:
Cut up your credit cards
Stop spending money you don’t have. Stop it right now. Cut up your cards and cancel your accounts. Yes, your credit score will take a ding, but not nearly as big of a ding as it will if you have to file for bankruptcy. If you are worried about an emergency, save up cash in an emergency fund before you start tackling your debt. If you can’t afford something don’t buy it.
You’ll need a little extra money to put towards your debt. If you can pay more than your minimum payment your debt will disappear much faster. Cut out all extras. Get rid of cable, movie streaming, eating out and expensive clothes. Start packing your lunch and you’ll save upwards of $100 a month!
If you can’t find extra money by cutting out extras, try scaling back. Move to a smaller/cheaper house, sell your second car and look for cheaper insurance.
Stay focused on your goal
Stay focused on paying off debt. Anytime you have any extra cash put it towards your debt payments. When you are living on a tight budget, cutting back even more isn’t easy. You can still have fun by finding free or really cheap ideas. Write your goal down and keep it where you can see it. Stay the course!
Once you’ve paid off your debt, you’ll have a little extra cash to invest in your future. Here are a few ways to use that extra cash to fund your retirement:
While you are paying off your debt study up on superannuation so you can take advantage of the program. One thing to keep in mind is that your employer is required to contribute 9.5 percent of your eligible ordinary time. This is basically free money towards your retirement so make sure you are getting it!
Invest, Invest, Invest
Once your debt is paid off, instead of adding all of that money to your monthly budget and living large, add about 20 percent back into your monthly budget (so you have more wiggle room for expenses and fun) and take the other 80 percent and invest it. So, if you are paying $500 a month towards debt, keep $100 a month for you and put $400 towards investing. That $400 a month adds up to $4800 a year.
Spread your money out. Do not invest all of your money into one account, that’s akin to putting all of your eggs in one basket. Instead, consider a mutual fund which takes your investment and spreads it out over several investments.
With a little patience and a lot of discipline you can pay off your debt and begin investing in your future.